Margin Policy can change at any point of time based on market volatility.

The following post will give you our standard margin policies while trading equity intraday & delivery, f&o, currency and commodity. You can trade equity either intraday or delivery on NSE, BSE and MCX-SX. If you are not enabled on the latter 2 exchanges, print the segment addition form and courier back to us if you wish to.

1. Stocks or Equity or Shares Trading

Intraday equity:

When you take a trade in equity and square the position off before the end of day, it is called as intraday equity trading. Since you don’t carry the position overnight, we provide you a margin or leverage of between 3 to 20 times on around 150 liquid stocks to trade for intraday. You can trade intraday at Zerodha with leverage by using these 2 product types while taking a trade.

MIS (Margin Intraday Square off)

When you use this product type, you commit on keeping the trade intraday and hence we give you a leverage between 3 to 10 times based on the risk and volatility of the stock. Our margin calculator tool has a list of all stocks and the MIS leverage you get.

When you take a trade using product type as MIS, if you don’t exit it on your own it will be auto squared off around 3.20pm.

If any intraday position or a MIS trade is not squared off on the same day due to any link or system failure or any risks associated with internet/wireless based trading which may occur at the end of the Client, Zerodha or the respective Exchange, it shall be treated as a Cash and Carry (“CNC”) or NRML position and carried forward to the next trading day. In case of such a situation arising, the onus of squaring off the position will be on the Client. Our RMS desk shall square off any such position, without the requirement of a margin call, if the necessary cash is not available in the Client’s account.

CO (Cover Orders)

Cover orders is a unique feature at Zerodha where you can trade intraday using market orders but with a definite and compulsory stop loss. Since the risk with such a position is low, the margin required is less and hence the leverage higher. When you trade intraday using cover orders, the leverage you get vary from 6 to 20 times(twice as much as MIS). But again all open positions get squared off around 3.20pm. Read this to know more on cover orders.

Delivery Equity:

When you buy stock and hold it overnight, it is called a delivery trade. At Zerodha, you need to use product type as CNC while placing a trade to take delivery of equity stock. The product type CNC will show up on your order window only if you have a demat account mapped to your trading account since you would require a demat to take delivery of the equity that you purchase.

At Zerodha we provide no leverage when you are executing delivery trades which mean that you if you want to buy Rs 1lk of stock as CNC, you will need this Rs 1lk in your trading account and similarly if you want to sell Rs 1lk of shares with product type as CNC, you will need these shares in your demat account mapped to your trading account.

2. Futures Trading – Equity (Stock & Index), Currency & Commodity

Futures as such are inherently leveraged which means that to buy X amount of futures you need only a small portion of it called as margin in your account. This margin to buy futures is stipulated by the various exchanges.

For NSE, Zerodha settles with exchange on T+0 and hence has the lowest futures margin requirement.

While trading futures at Zerodha you can use 3 product types:

NRML (Normal)

To take position as NRML you will need the complete exchange stipulated margin, but once you take a position as NRML you can hold the position till expiry, provided you’re maintaining such stipulated Exchange margins until expiry.

MIS (Margin Intraday Squareoff)

MIS is used by intraday traders as all open positions get squared off before the end of day. But since no position is carried forward overnight the margin required is also lesser than the exchange stipulated margins.

For Commodity futures, MIS margin: 50% of NRML margin, all MIS positions squared off about 25 minutes before market closing

For Currency futures, MIS margin: 50% of NRML margin, all MIS positions squared of around 4.30pm.

CO (Cover orders)

Cover orders is a unique feature at Zerodha where you can trade intraday using market orders but with a definite and compulsory stop loss. Since there is a stop loss placed, the risk of the position reduces and hence the margin required to take it reduces as well. Read this to know more on cover orders.

Using cover orders, you can trade futures with lesser margins than NRML and MIS. Presently Cover order facility is available for equity, commodity and currency futures.

3. Options Trading – Equity (Stock & Index) & Currency

Option buying:

When you buy options, either equity or currency there is no additional leverage we provide except in case of market orders where orders may get traded in value excess of funds available in the account. So if you are buying calls or puts of any contract, the premium required to buy them has to be present in your trading account. You can trade options either with product type as NRML or MIS, but since there is no additional leverage provided if you use product type as MIS, it is advisable not to use MIS while buying options since all MIS positions would get squared off before the close of markets.

Option Writing/Shorting:

When you short an option, the margin required depends on various aspects like underlying, expiry, volatility and more. We are the first brokers in India to have an online SPAN calculator tool which lets you calculate the margin requirement for shorting an option by mocking the position in the tool.

You can short option either using the product type as NRML or MIS. The SPAN calculator tool lets you know the margin required to hold overnight or NRML margin, if you trade using MIS you will need only 40% of that margin.

SPAN Tool Calculating Option Shorting Margin

Important

The settlement cycle in India is T+1 day in case of F&O (Equity, commodity, currency) and T+2 day for Equity delivery. What this means is that any profits from F&O positions gets credited only the next day, and any sale credits from equity delivery trades happen on T+2 day. This credit is available for you to trade intraday, but there might be a short margin penalty applicable if you carry forward positions using this non-realized profit.

When you send Market Orders in Options for multiple lots, our system checks only for the margin of the first lot and validates your order. For example, if you see the price of a Nifty option at Rs. 100 and you have Rs. 75000 in your account and you send a market order it validates only for the first lot and sends your order through. During execution if the price of the option goes higher, your order still gets completed although you will end up with a debit balance. This debit balance has to be cleared by you by end of day failing which you will be charged interest as per our policies until you clear the debit balance.

Because of illiquidity of stockoption contracts, market orders have been disabled on stockoptions. Only limit orders are allowed. Place a limit buying order higher than the current price or selling order below the current price, this will act as good as market order but will also protect from any impact cost due to illiquidity. You can place market orders on index options.

For all intraday positions (MIS, CO, BO), even though we run square offs automatically, the onus is on you the client to ensure all MIS,CO,BO positions are squared before market closing.

The SPAN tool can also be used for calculating margin requirement for multi-leg trading strategies.

Founder & CEO @ Zerodha, team working towards breaking all barriers that I personally faced as a retail trader for over a decade. Love playing poker, basketball, and guitar. Getting body fat % in single digit is the next personal endeavor :) .

Yes, you need to send us an email request to pledge stocks, once you do this the stocks would move from your demat to Zerodha pledge account, and once there you will start getting intraday margins for F&O immediately

Can I use this margin for intraday equity trading too? Also are there any charges for pledging the stocks? And is it really necessary to send an email for the same? With traditional brokers like IIFL, one needn’t send any email and it is a very hassle free process.

No Prateek, this can be used for F&O trading only. One round trip of pledge and unpledge costs around Rs 55 per scrip (irrespective of the quantity).
On Q, we are giving an option to place a pledge request. It will still take around 24 hours to get the benefit.

Unlike brokers like IIFL who keep the stocks with them when they pledge, we pledge it directly with NSCCL (NSE). So we don’t end up lending the same stock to someone else, or charge interest on margin provided.

Thanks for such a prompt reply. Initially I was amazed when I saw 0.01% brokerage for intraday equity trading but now I guess I will have to continue with IIFL (who charge 0.05%).
And I am sure you would know this, but still just to clarify, IIFL doesn’t charge any interest on the margin they provide for intraday equity trading.

Can you please confirm –
1) Does Zerodha charge interest on the margin provided against shares pledged?
2) If yes, on just the margin utilised or the entire pledge created? Also how much %?
3) Am I eligible to get bonus, dividend etc on the pledged shares? I want to create a pledge and keep writing covered calls for a considerable duration.
4) If I have one lot size quantity of shares (Say 500 shares of RIL) pledged and if after haircut on that stock the margin available is more than the required to write a CALL on the same stock, Do I still have to bring some cash too? If yes, how much?
5) Same question for Futures. Asking separately because futures have EoD MTM. So, I believe some cash component will be required so as to avoid small transactions for any shortfall in margin.
6) Is Writing a CALL on the pledged underlying different than using that margin for writing CALL on some Index or unrelated stock? I am asking from Zerodha margin policy point of view and not risk-cover point of view.
7) Que 5 is asked because if I have 2 underlyings pledged to write covered calls will the margin be pooled or will it be recognised in pairs of (underlying-Call)? I hope it does. If one underlying falls in value reducing over all margin without increasing risk level will there be an auto square off? which position gets auto squared off? The other underlying may be up and that call might be showing a loss. Do I have any control on which position gets squared off? IMO, nothing needs to be squared off since there is no margin risk on any position. They are COVERED calls and any RMS should recognise that fact. If not, is there any way I can mark some position as a covered call position and pledge equivalent number of shares?

1. Currently we are not, very soon we will as we intend to provide margins without even pledging (stocks lying in demat).
2. How much is still not decided. But for now, there is no charge. It will be charged based on how much margin used.
3. Yes, you are the owner of the stock, you will get benefit of all corporate action.
4. ALL MTM losses has to be paid in cash to the exchange. So we usually tell clients to keep anything between 10 to 20% of the margin required in cash.
5. Same as above.
6. No, it is all treated as call option writing. No margin benefit you get because you are writing calls on the same stock.
7. Unfortunately exchanges won’t recognize this as covered calls. All losses is debited immediately whereas all credits is received on T+1. You will not have control on what gets squared off first. So it is best to have some additional cash for all MTM losses.

Sir, Would it be Pledge or Pool transfer.? Coz in case of pledging the shares, our DP account get sealed by you which can’t be transferred even after selling for those stocks (which are in pledge), you need to let it released after selling it. Is it correct?

A follow up question on this one: is it possible to request Zerodha to sell shares that have been pledged by an account holder (via phone/email)? Also, if this is possible, can such an order be a Limit order or will it only be a market order?

thanks but I guess it is not fully clear, perhaps because I didn’t ask the right question. Allow me to ask with a hypothetical example:

Let’s say I have Axis Bank stocks worth roughly 1lacs pledged and as a result have a margin of about Rs 70k (after haircut; I’m not sure the haricut is 30% but let’s assume for the moment that’s the case) Now let’s say I use this margin plus a little cash and buy futures to keep overnight. Next day markets cracks down and I have heavy losses – so much so that the cash isn’t enough to cover MTM losses.

Can I then send email (or phone) instructions to zerodha to unpledge+sell immediately and cover the losses?

Vikesh, it will be a pledge. So we take the shares from your demat and depost it with NSCCL (NSE) directly, and this margin gets released for trading F&O to your account. If you want to sell, you will have to first unpledge and only then sell.

PD, This process of manually having to pledge is something we will be stopping soon. It is quite painful operationally and also since the margin can’t be used for options/stock buying, it also causes some confusion. Will keep you posted on what route we take.

Dear sir,
I am a new trader in zerodha. Can you please tell me what is the exact square off time for intraday trade i.e BO. In your site time has mentioned as 3:20 but today my trade has square off at 3:15. And for 5 mints i had lost Rs. 400. Please clarify it.
Regards

I have entered in 4 fno stock futures position yeterday, while entering i have sufficient funds, later today wen i checked my acc is short of 18k funds, may be due to MTM..My question is today will get chance to exit and get some funds or is there anything like u will squareoff to provide for the margin

Hi,
I generally buy at close today & sell next day at open (BTST).
Is trading on margin allowed in this case on Zerodha or I can buy only my account balance without leverage.
someone told me that ICICIdirect allows to keep margin positions for 5 days.
Best regards

can i do BTST trades in zerodha. suppose i bought today and want to sell tomorrow those shares can it possible bcoz in 1 day these shares would not come in my account so how it is possible to sell without coming in my account?

With us, you will need the complete money for keeping overnight equity positions.
@Girish, if you are checking this position on a weekend, we run testing sometimes and it is possible that it will show 0 at those times..

You can short, but only for intraday. At 3.20pm, it gets bought back if you haven’t bought back on your own. To be able to short intraday without stock in your account, you need to use the product type as MIS while placing your order. The list of stocks that can be shorted for intraday is available on this link.

Sir, I bought 1 lot natural gas with expiry date feb2013 at 192.20. Then the price suddenly fall around 177 within 2 days. Then it was automatically sold by you. What is the reason? Even though validity upto feb 2013 and enough cash in account, why it was sold. my ID DK0313

Hi Velu, As you would have received an email from our end already, the position was squared off because of insufficient margin to hold the Natural gas position. Do reply to the email if you need someone to get further clarity.

In delivery based equity trading, after i sell a stock will the entire amt be available in my limit amt immediately or only after T+2 days? And why no margin for delivery trades? ICICIDirect provides margins for 5 days in equities cash segment.

The margin is available for you to take a fresh position immediately, but if you want to withdraw the funds you will have to wait for T+2 days.. We presently don’t allow margin for delivery trades, but during the course of this year, we will most likely start offering..

Thank you very much for the information. I have a small query about BSE & BFO
1. I am not getting how much margin i need to pay for One lot of Sensex?? Kindly tel me how much margin to be maintained to be kept for overnight position??? 2. BSE scripts how much leverage for intraday??

span calculator shows me a margin of 11470 for hindalco fut sell and 110 call buy. But when i put a spread order for the same it gets rejected saying that the margin required is around 42000, even though i have bal of 35000. can you explain

Vijay, Yes the margin required for both the positions together is around 11500.. The issue here is that to get this margin benefit you have to enter the position separately and not through spread or basket orders..

So if you short hindalco futures(you will need 35k for this) and then buy the calls, the margin drops down to 11500, but to first short hindalco futures you will need that 35k..

If margin in your account is less, what you can do is that use MIS product type to short hindalco futures, margin blocked will be only 40% of 35k and then buy the calls.. Now go back and convert your futures from MIS to NRML, to know more on position conversion [click here](http://zerodha.com/z-connect/blog/view/zt-position-conversion)

Anand, Spread orders is ideally used only when you need immediate execution which is important when placing a strategy involving multiple positions..
So if you buy nifty futures and sell nifty calls, you need both to be executed immediately or get cancelled, otherwise there is a risk that you position is naked.. Use spread orders for that..

1) I buy 10 shares at Rs 10. If the stock goes down I want to place a SL at Rs 8 and at the same time if the stock goes up I want to sell it at Rs 12. Can I place both the orders at the same time?
2) If buy one lot of USD INR at 53.9000 and it moves up to 53.9050 what is the profit I make. (I am not clear how sure on the increase in value)

1. Yes you can place both the orders at same time, but make sure that you cancel the other when one gets executed. So if stock goes to 12 and you sell the stock for profit, make sure you cancel the stop loss that you had placed at 8 otherwise if the stock comes down to 8 it will get sold again..

2. In currency price is given till 4 decimal points. 53.0000 and minimum movement is 0.00025. So if USDINR is at 53.0000 it can to 53.0025 53.0050 53.0075 53.0100 53.0125 and so on.

For 1 lot every 0.0025 means a profit or loss of Rs 2.5 , So if you bought at 53.9000 and sold at 53.9050 that means a profit of Rs 5.
For brokerage charges and others you can look at the calcuator..

Suppose I buy 1 lot (1000) of ZINCMINI @ Rs.112 of March 2013 Contract and I sell 1 lot (1000) of ZINCMIN @ Rs.113 of April 2013. The present rate of March contract is Rs.112.50 and March contract is Rs.113.50. What is the Margin Money required for this transaction and how to calculate margin. Please explain.

For trading option strategies like iron condors, what would be the margin requirement for selling nifty 5600 put and buying 5500 put for the same month and 1 lot each? The SPAN calculator says it is 19249 – but shouldn’t it be less since the short put is hedged by the long put?

The margin benefit you see on SPAN calculator, is what NSE asks for, it reduces a bit when you are hedged, but not by much.. Remember on SPAN calculator, after adding both the positions using net quantity, you click on both of them when you click on get SPAN..
Presently for this position the margin requirement I see is : for shorting 5600 puts, Rs 18900, for shorting 5600 puts and going long 5500 puts: Rs 18000.. SPAN goes down and also you don’t require extra funds for buying the 5500 puts..

The reason exchange has to do this is because once you have both positions and if you exit the long puts, there still has to be sufficient margin to hold the short puts, otherwise it is considered a risk.. I guess this problem will get fixed only when exchange approves a product which let’s you enter a strategy in a single click and exit them in a single click…

Thanks for the detailed reply. Is the exchange at all looking to implement such a product in which we can enter/exit strategies in a single click as you mentioned? Do you know of any timelines in this regard?

Hmmm.. We as members have put a request to consider, but exchange doing it anytime soon, doesn’t seem like. When there is a question of risk getting reduced, they are for good or bad tough to change their policies..

Can’t you provide this feature on your own?
A sort of multileg or combination order.
I am not sure if brokers have this kind of freedom.
I do appreciate the kind of system change this would entail even if it was given.

Yes we do, but unlike icici which gives you an interface, you will have to send us an email asking us to pledge stocks.. We will give you margins for the same from the next trading day.. How much margin depends on the stock, some stocks 80% some 60%.. We will put up a blog on this by the weekend, do keep following us on this..

By using the product type as MIS while placing your orders, you will get a leverage of 2 times and this will be allowed till 25 minutes before closing of the market. If you don’t square it off, all your MIS positions would be autosquared off 25 minutes before closing of the commodity markets. You can use position conversion to convert MIS to NRML, once done you will be allowed to hold positions overnight, but you will require complete margins for that.

I want to buy 1 lot of NIFTY April 5800 Put(Price of 121.9) and sell 1 lot of April 5500 Put(Price of 21.5). Please note that the put that I am buying is fully covered because of the 5800 Put that I would be holding.
1) What would be overall margin requirement?
2) Can I place this order as limit order, say when I am able to enter the above two contract at 90/lot? If so, How do I do that?

Presently Nifty 5800 puts are 96 and 5500 puts at 15. To short 5500 put margin required is around 18k, but the combined margin required to short 5500 put and buying 5800 puts is only around 13k.

So you get a margin benefit of 5k on option writing + 5k on buying the 5800 puts, together a benefit of almost 10k.

We offer you a tool called (SPAN calculator)[http://www.zerodha.com/z-connect/blog/view/span-calculator] which is unique and will help you to know the margin benefits even before taking a trade.

You can place orders for both, but the margin benefit you will get only after the position is executed. So if you place an order to short the puts, you will need 18k, but as soon as you buy 5500 puts, it will drop immediately.

So yes place a limit order to buy 5800 puts at 90 and sell 5500 at 15, but you will need separate margins for this, once both are executed your margin requirement drops..

Taking example of prices that you have listed, to buy 1 lot of 5800 put I need 4800 rs. If I am selling 5500 put at 15 rs I am getting 750 rs back. As long as I have 5800 put, why is there a margin requirement for 5500 put. Isn’t my 5500 put that I wrote completely protected by the 5800 put that bought. Shouldn’t’ the margin requirement actually be 4800-750=4050?

I understand what you are trying to say, but unfortunately exchanges don’t recognize such spreads. The issue for the exchange is once you have taken the position, what if you first square of the long puts? You will be left with short puts with unlimited risk and only 5k margin…??

Hence exchanges won’t let you trade with the margins that you are thinking.

Why cant zerodha put a simple rule at the time of closing the contract. If I try to close the 5800 contract without first closing 5500 put then I am allowed to do that only if I have the required margin to write 5500 Put. If I close both of them in one go, then I am fine. For no additional risk of writing a covered put of 5500, why would you want a margin of close to 13K when 4K is sufficient. I mean I should be able to do three times with 13K in my account.

Chandra, this is not a rule we can put, these are rules set by the exchange. If we collect margin from you which is lesser than what is prescribed by the exchange, there is short margin penalty levied by the exchange.
As a trader, I understand what you are asking for, but unfortunately not possible today on the Indian exchanges.
The only positions that get a margin benefit is the calendar spreads, that is because the calendar spreads are quoted on the exchange. Check this link.

Dear sir i am sumit kumar jha i have started trading with your trading account i have some question from you

1>Do you have charge extra money if we are using margin money which is provide by you?
2>I have deposited 20000 rs and traded first time on 18/04/2013 i have earn approx 450 rs but in my account it is not showing as well as my balance shows 19989.89 instead of 20000 why please help me?

1> No, there is no extra charge for using our margin trading facility.
2> Looks like you are checking your balance before the trade process has been done. Friday was expiry of Global contracts and hence there was a delay in the file processing. Please check your account now and you would see the credit, if any.

hello sir,
i have a question on margin. if i buy a nifty future @5500 then about 27500 margin needed. now price goes up to 5600. now if i want to get a fresh sell call do i need more 28000 as margin. or due to hedge i can get any discount on margin?

When you bought nifty at 5500 , 27500 was blocked, if you are selling the same nifty at 5600, you are exiting and for this no margin is required. It is like you are selling what you have bought.

If what you mean is that you are writing/shorting a call option, yes you will get a margin benefit and don’t require 28000. We have designed a tool on ZT through which you can calculate the exact margin benefit even before taking a trade, Click here to see the SPAN calculator.

Actually in terms of margin I usually face a problem, for many a times I do not regularly track my margin requirements and which in turn squares off my position, even though I wanted to continue in that scrip.

I have a suggestion, if zerodha even if at some cost, starts to provide us alerts before sometime for our margin requirements so that our position is maintained

Hello Team Zerodha,
You have been evading answering this for a while. I hope you would own the responsibility of assuring your clients that.they can trade with confidence relying upon margin calculation interface of your trading platform. Please realize that not answering is not an option.
Can you confirm the following that :
1. Your trading platform takes care of stipulated margin requirements when a trader places order in FNO for taking overnight positions?
2. Trader need not worry when your trading platform shows enough acredit balance at the end of trading hours (3:30pm) while the margin statement generated in the evening (around 7pm) shows a much lower credit balance (or even a small debit balance) and next day morning trading platform again shows enough credit balance?
Here by ‘enough’ I mean about 8-10% of total funding available in the trading account.
Thanks & Regards,
Anil Kumar

1. As long as you are taking a position with order type as NRML, stipulated margin requirement will be blocked while placing an order.

2. Your definition of enough is not clear. in F&O margin requirement changes based on the contract you are trading, some of them might require 8 to 10% while others might require more. But as long as you are having exchange stipulated margin it should be enough and nothing to worry about.

That said, the important thing to note is that margin requirements are updated by the exchanges 5 times during the day. There is a possibility that on an extreme day, the movement in the stock could be so drastic that margin requirement might go up suddenly. This doesn’t happen often though.

When you write deep in the money options, this rule might again not apply. If you write deep in the money options, pocket the premium and use it to write more options, there might be a credit showing, but it won’t be a realized credit and hence it is possible that you have a short penalty as levied by the exchange.

But as long as you are playing by the rules, there is definitely nothing to worry..

By ‘evading answering’ I meant actually what it literally means. Same query was posted about 3 weeks back along with a query on algoZ where I also mentioned that Zerodha seems to be ignoring the basics. While answering that query you assured to get back on the margin query but never came back.

I always want to play by the rules. That is the reason I also want that rules are being enforced in spirit and the mechanism to enforce them is not faulty. Helpdesk at one time has said that I can rely only on margin statement. Now that is not just impractical (but unfair too), as positions have already been taken relying on your trading platform.

By ‘enough’ I meant that if I have funded my trading account with 500K, I leave 40-50K unused (at the close of trading hours) to provide for the market fluctuation. The positions are always taken with ‘NRML’ order type. But the strange and worrying part is that while your trading platform shows withdrawable balance of 100+K (at 3:30pm) and also the next day morning at 9:15am, your margin statement shows just about 25K. And, this keeps happening for many days for without any change in the underlying positions. Obviously, this is not due to extreme movements in the stock/index. Snapshots of discrepancies have been sent to compliance dept multiple times.

I strongly feel trading platform (at EOD) and margin statement should reflect the same status (except for situations like T+1 credit, ITM options and violent market movements in between). It would be worth checking your systems for bringing them in sync.

My bad, if I missed your previous query, but can you email me your client ID to [email protected]. Now that I have heard your query out, I can see another reason why the margin statement may differ sometimes. Assume that you were carrying options from before, when you sell them, we let you take a fresh position using the same margin, but all f&O settlements happen on a T+1 day basis. So the margin statement for that particular day won’t show the credit you got by selling options held previously.

So for eg, if you 5lks in your account and bought 4lks of options. Tomorrow you sell the 4lks of options for 4lks. We will still let you buy for Rs 5lk, but the 4lks credit will happen only on T+1, day after tomorrow. In tomorrows margin statement we cannot show this 4lks credit because it is not realized. If we have to sync the margin statement with the trading terminal position on this, we will then not be able to allow trade on options carried forward and which is sold.

Hopefully this clarifies, but do send me that email with your client ID, will double check, also let me know which day’s margin statement are you talking about. [email protected]

Scrip “Aloktext” is supposed to give 9 times leverage , but according to Zerodha Customer Care its been diluted to 3 few days back , So my Question is When u gonna Update the IntradayMargins.xls , patiently waiting for it.

ok sir i am just a beginner in trading stocks so i dont know much about leverage. lets say i have 25000 rupees to trade then what wll be the leverage if i trade in blue chip stocks like HDFC,BAJAJAUTO,RELIANCE etc???????

Hello sir, I want information about intraday margin for equity future.
For example if I want to buy Nifty JULY future at 5800 for intraday(MIS) exactly how much margin is require. I am asking this because I dont know wheather it is 40% or 25% of original margin.
If Nifty margin is 23000 for positional, for intraday wheather it is 9000 or 6000. Please clarify this as early as possible.
Thanks.

VMGJul 10 2013, 8:25 pm
Thanks sir to solve my query about difference between MIS order and COVERED order and associated margin.
Now I want to confirm only about covered order. Covered order means just an automated order executed as per market rate and stop loss order is also automated calculated.
I want to know wheather CO is place manually, mean LIMIT order for buying (IF Nifty is at 5850 and I want to buy at 5840).
Can I place CO order as LIMIT order ?….
Cheers..

To buy and sell futures, add the future to the marketwatch, use F1 for buy and F2 for sell, keep product type as NRML or MIS and place your order.

Margin depends on the future that you are trading, you can see the margin for various contracts as explained in the blog above. If you use MIS you will need only 40% of that margin, but you will have to square the positions off by 3.20pm.

Sir as i am a student so i want to trade with little money. Can i trade with 5000Rs after i learn properly i will add more money to account.?????
If i use margin in my case let my investment is 5000 and i got leverage of 10times then i can total trade for 50000Rs then what interest i have to pay for using margin???????

If you are trading on equity depending on what stock you are trading you get 3 to 10 times. So yes for eg you can buy 50,000 worth of reliance with only 5000 in your account. But this leverage is allowed only for intraday trades and you have to square off by 3.20pm otherwise it gets autosquared off.

Sir i checked out the margin policies Excel and found that in cover order the stop loss must be 1.5% range. But take this example. If i buy opto circuit at 30 and according to this stop loss should be 29.55 i think (using cover order) and lets say i got 10000Rs then leveraged amount will be 10000×17(as for opto circuit leverage is 17times using cover order). Now i can buy approx 5600 shares. As the stop loss is very near to share buy price if it hit stop loss then i will be losing 2617Rs(i got this answer from your ZERODHA BROKERAGE CALCULATOR PAGE).

All i want to ask is if i use only margin which gives 8times for opto circuit then my total money will be 80000 and i can buy 2600 shares approx. lets say i didnt use stop loss and my target is 30.25 then i will get a profit of 603 approx. It is much better to earn a little than losing a lot. so I want to know if i use only margin( i.e not cover order) then can i use it without stop loss with target price.

can i use target price without any stop loss in margin intraday sqaure off. Ya i know if price fell i will suffer huge loss but as opto circuit is a high volume stock increase in only 25paise is somewhat possible..

Sir i want to know does Zerodha have instant order execution. Lets say i have 10000 shares of IVRCL INFRA which i bought at 15.20 each and a put a SL of 14.60 and target of 15.35. Lets say after 1 hour the price is hovering around 15.35. then according to my target all the shares should have been sold out. but as we know the price of many shares fluctuates even in 1 second so as i have a huge number of share will all my shares be executed at 15.35 atonce or slowly slowly based on market prices fluctuation it will execute.

If all shares get executed when price touch 15.35 at once then i will be gaining 1400 approx. hahaha. Reply please i am curious and waiting

The order at 15.35, the executed will be based on first in first out. So if you were the first person putting the order at 15.35 and if someone comes and buys it at 15.35, then your order will be executed otherwise it will remain pending.

So execution of your order will depend on how many people buy at 15.35, it is the same way with every broker.

If i write an out-of-the money option that becomes in-the-money sometime later and i dont have the future margin+30% as required to hold it will it get squared off immediately or will i be given notice to arrange some more margin?

Also how far on in-the-money or out-of-the money must an option be to concider it deep?

When you write an OTM option, when market goes against you the margin requirement will keep going up daily. You will have to track the margin requirement for the option you hold and ensure that you have enough funds to hold this.

The logic of future margin +30% is not correct.

You can use the SPAN calculator to know what is the exact margin requirement at every point of time. Click here to read about SPAN calculator.

You mean margin for writing options right? We have a tool for this called SPAN calculator , read the blog.

Usually writing for options is around future margin if you are writing in the money options and it keeps reducing as and when it goes out of the money. See the blog on Span calculator if you want to see the exact amount.

Does margin required for future trading depends upon whether i buy or sell future? e.g. if margin required for buying nifty 1 lot is INR 25000,will it be same for selling 1 lot of nifty future?Ifnot,from where I can find that one? In margin policy, it has been stated that
Once bought as NRML, you can hold the contract till the end of expiry as long as you meet the MTM obligations on a daily basis.
I have sold 1 lot of Mcleord Russel. If i check span margin excel, itsays margin required(not sure buy/sell) is 34685. Now If i check my open position at end of day, it has got 2 columns which is confusing me – clos. Price(13945.95) and MTM value (-13683450.000)
Total MTM value in this report is coming out to be -65671892(i do have other SELLS future also). SO I should infer from this big amount?

Yes you can give all this as collateral, will cost you around Rs60 in regulatory charges to pledge & unpledge for every stock/MF you hold. But once pledged you don’t have to pay any interest for the money you use for trading options..

Now that I have transferred Mutual funds to my zerodha account & trying to pledge them as collateral , I am being told that it is not possible.Can you please get my MF’s pledged to generate margin.
regards

one final question.
Can I buy mutual funds through my Zerodha account OR can I transfer mutual funds from other demat account to zerodha account (I know shares can be transferred).
I actually hold quite substantial amount as MF in my other demat account & intend to use it as margin by transferring it to my Zerodha account.

If I sell the stocks from my demat holdings, Can I buy back the shares immediately if it comes to a lower price on the same day? Will it allow or should i wait T+2 days to buy the shares once I get cash?

Similarly after selling the stocks from my demat holdings, can I use that money for intraday trading on the same day or should I wait till T+2 days till the cash comes to my account?

Also by default, the intraday chart shows 22 days data. How to make it to show just the current day intraday chart by default? I tried using the template but it doesnt seem to work.

You can use the proceeds from the sale to do intraday trading immediately.

By default it will show 22 days and this has been made because of request of a lot of traders. To look at 1 day chart, you will have to zoom into or select by left clicking and dragging on the portion u want to see on the chart.

The option margin system in India works very differently compared to the developed markets.

When you sell 6500 calls and buy 6600 calls, the risk is reduced and hence the margin required to take this position also reduces, but not to the extent u r expecting.

If you want to naked short 6500 calls Nov margin required is 21200 and to buy 6600 another 1500. If you take both the positions together the margin required is around 19700, so around 15% margin benefit.

Theoretically yes, but there is an execution risk while taking this strategy. What if you exit one and not the other once taking a position with lesser margin? Unfortunately other than calendar spreads you cannot trade any other spread directly.

I am already a client for only trading in FNO. I am interested to do Intraday trading in NSE equity but its not showing in segment. how to add it ?

secondly,

I want to trade using Zerodha trader in NSE equity (no deliveries) in this case how to get userid for same and what will be margin? as i have heard of that in ztrader the margin is more as compare to NOW.

If you are not seeing the NSE segment then it means you didn’t open a demat account with us or didn’t link any other existing demat of yours. So you have 2 options for this:

1. If you have any existing demat account, send us a copy of your demat client master report( the statement which carries your Demat account number and your name) requesting to map to your trading account. Once this is done, you will automatically start seeing the NSE equity segment and you can start doing intraday trading in equity.
But note that if you link some other demat of yours, you will be able to buy stock for delivery, but you will not be able to sell that through us, you will have to sell that with the broker with whom u have opened the other demat account.

2. If you want to trade delivery based as well, open a new demat account with us. You can call the sales executive who helped u with the trading account or call on 080-49132020 for this.

margins on ZT is actually similar to NOW, ZT also gives u the option of cover order whereas NOW doesn’t.

Risk of running brokerage business, whichever part of the world. 🙂 , The reason why we as a brokerage are very conservative in terms of leverage and usually the margin required keeps going up with increase in volatility.

sir,
i just want to short 6600 ce and 5700 pe of dec expiry just targeting premium recievables. my doubt is that whatever required margin at the time of execution of trades is just enough to hold the positions till expiry date or i need to keep my margin requirements updated daily ?

Firstly I hope you are using our SPAN tool for calculating option writing margin, here is a blog on how to use it.

When you write options since the risk is unlimited a margin is blocked and similar to futures this is marked to market and hence need keep your margin requirement updated daily. So if the position starts going against you, you would have to ensure that the minimum required margins are present.

Hi Nithin, Instead of blocking such a huge amount as margin, can you provide something like setting a global SL % on options sold. For e.g If I set it to be 10% then as soon as the price goes beyond 10% system can trigger buy and one needs to just keep required money to sell it at LTP + X% as per his/her choice…in current scenario even if you are selling far ends of the strikes systems blocks unreasonable amount.

We are among a select few brokerages who block the lowest margin for option writing for overnight position because we settle with exchange on T+0. These margin requirements are as stipulated by the exchanges, and not really in our control. Also, I get your point of SL and etc, but as you know when blocking margins exchanges have to think about the worst case scenario, is the margin enough if there is a drastic movement in the underlying, which probably happens once or twice every few years. It is important to not compromise on this risk as both exchange and us as brokers.

Yeah, you are right Nithin, I was not considering gap openings and as a broker one must have safe margins. Still have one more question, on a day like general election results when markets hits double circuits, how do you ensure margins?

The exchange SPAN margins usually go up around news events to cover for the risk, but one of the risks that brokerage run as a business is that nothing can be covered 100%, and hence it is better to be safe than sorry.

I have pledged shares worth 6.5 lacs with you. You Still Require 30% Cash margin over and above the shares pledged to let me trade. Though I understand the logic of asking for a balance I still dont understand why you cant let me trade. If there is an MTM at EOD and I do not pay in you have enough stock with you to close the position the next morning.

We have been a little conservative on this side, but we are changing the policy of keeping 30% as cash margin to only 10% as cash margin in the next few days. One of the reasons for asking for this cash margin, is because selling a pledged stock is the last resort we want to take.

Can you email your client ID to [email protected], he will update you as soon as the new margin policy is in place.

Sir I have a Demat account with another broker and having only trading account with Zerodha and I am having soft copy of the said demat account detail, Further how can I link that account with my trading account at Zerodha with that soft copy details.

Take a print, sign, and send the demat account details to our office in Bangalore asking to map it to your trading account. This will be mapped to your trading account, but do note that when you buy stocks at Zerodha it will go to your demat, but while selling you will have to sell with the same broker whose demat you map.

Hi
Have Pledged shares wortth Rs 6.5 L Haircut about 5.5 L.Cash balance of about 50 K.
Kept an overnight position which requires a margin of Rs 60 K. This has now been debited to my running account and the balance has gone into negative.
Shouldnt only the margin be debited to my collateral account and any MTM ( profit or loss) should be transferred to my daily running account.

Hi Nitin, as stated by you in jan 2013, zerodha going to start leverage for delivery in Equity likewise in margin at present (e.g. Icicidirect T+5 days).
its almmost end of the year now, when can we get it?

Hi Nitin, as stated by you in jan 2013, zerodha going to start leverage for delivery in Equity likewise in margin at present (e.g. Icicidirect T+5 days).
its almost end of the year now, when can we get it?
i m loosing money in MIS….

Deepak, leverage for delivery based trades is not something which is in our priority list right now. We will think about giving leverage for delivery based trades when we have a DP of our own.

My advice to you is to figure out a good system for trading intraday. Or if you feel your position will make money in a couple of days instead of on the same day, you can trade futures which is already a leveraged product that can be held until the expiry date with just a fraction of the amount.

You can pledge MF’s and ETF’s, you will have to send an email request to [email protected] asking to pledge the quantity of MF or ETF which is in your demat account opened with us. You can send an email to [email protected] with your contact, he will get in touch and help you out with the same. We will soon have this put up as a post.

hi
I wanted to intiate a strategy in Nifty options.I would be carrying the position till expiry.So I wanted to know that the margin required would be the one which is shown in span margin calculator after the margin benefit.Will I get Margin benefit or not??Actually I wanted to send you the screen shot of the span margin calculator which I had calculated for my positions.How do I send it to you?

Hi:)
I have another crazy doubt.
Assume I have 1 lac rupees in my zerodha account.

Assume I am doing only intraday trades.

Now I want to take an intraday position in 1 stock which has a MIS margin of 3x.

So I will be able to do intraday for 3 lacs worth of shares, Correct?
……………………………………………………………………………………………….

Now is the crazy part:

Suppose I have spotted another 2 shares that also have an MIS margin of 3x each.

Now instead of trading 3 lacs(3x) worth of shares in 1 stock,
can i trade 3 lacs worth shares in 3 stocks(1x * 3=3x)??
I will be trading 1x in each of those 3 shares with the same 1 lac investment.
In either case I will be trading an amount worth 3 lacs in total.

In that way I could average my risks and stay in assured profit and also generate more brokerage
for Zerodha :p

sorry if this is a dumb question but this option would be really helpful:)

2nd part: If I am getting your question correctly, yes you can buy 3 different stocks for Rs 1lk which has 3x margin.

Let me tell you how it works, assume you buy 1lk of first stock, if it has 3x leverage, around 33k is blocked in your trading account. You still have 66k left that you can use anyway you want, trading 3x stocks, 5x stocks or whatever.. 🙂

i want to know how is the volatality of Gold Regular Near month contract. if i trade in 10 contract on intraday basis , will i be able to square off my position easily. i mean are there enough traders available.
secondly, does Zerodaha execute my large order in one go or does it square of few contracts first then again the rest, like in batches.

Gold near contract is pretty liquid, and you should be able to trade all of them at one time. With Zerodha the order limit on big gold is 10 lots, what this means is that you can execute 10 lots at one time, you don’t have to break it into small orders. But if you have to place 20 lots of gold, you will have to place 2 orders of 10 lots each.

You need to first transfer it to your demat account opened with us, once it is in the demat send an email request asking to pledge the MF. Email request is good enough. You can transfer most of the MF’s.

swetha, I guess it will be best if I can get your client ID so that someone from our support can call and run a demo for you. It will be easy for you to understand. Can you send your client ID to [email protected]

We might in the future, but no plans as of now. Presently if you need any leverage, we can help you setup a margin funding account through our Demat partner ILFS, after which you can use the additional leverage for both F&O and delivery trades.

In option writing,
When you make a loss, margin required increases, and when you make a profit margin required reduces. So if price is 120 and then today closes at 110, the margin required will reduce.

Margin required is reduced/increased based on the price at which you would have shorted the option and not based on previous day close

Is the same process for Future selling also? But i read the article. If i sold for Rs. 100 next day it close too Rs. 80. I have to pay 20 rupees from my pocket. and after the day its closes to Rs. 75. I have to pay only 5 rupees from my pocket compare to previous close

What is logical behind in this? Why should not i have to pay 25 from account. only 5 rupees.

Futures have what is called as daily marked to market. So assuming you sold at Rs 100 and today it closes at 80, R 20 is paid to you as profit. Next day if it closes at Rs 75 you get paid Rs 5 because you again make a profit (since you are short, you make money when market goes down). If assuming the next day it goes to Rs 85 ( since you are short, u lose when market goes up), you have to now pay Rs 10. This process is called Marked to market.

Hi Nitin ,
If I Buy any shares with NRML type, and not sold on same day, then
1) How much money will be deducted from my the savings account linked?
2) and next day if Sell those shares agian using NRML type, how many days it would take to get the settled amount to be credited to my account?
3) would ther be diffrences in brokerage charge when we buy Equity first dat with NRML type and sell it on on next day again with NRML?

Firstly, if you want to buy stocks for delivery, u need use the product type as CNC and not NRML. NRML is for trading F&O on overnight basis.

1. The money has to be first transferred to your trading account from savings, before you can purchase.
2. When you sell next day, money will come to your trading account in 2 days after you selling if you want to withdraw, but if you want to buy something else, you can do the same day.
3. Brokerage at Zerodha is Rs 20 flat per executed order or 0.1% whichever is lower for delivery based trading, so it won’t change.

Hi Nitin,
Thanks for the quick reply, Currently I am holding an account with diffrent campony demat account, I wasnted to verify the charges they are doing, so that I can close the account immdeialty if ther is any thing wrong.
On thursday(10th april) I had bought 700 shares of compony (per share is Rs 197) with NRML type , on same day I could not square off all the shares that I bought( in last minute I had kept sell order with market price, in which 363 shares transaction is not completed), When I check my linked saving account next day(11 th april) they have deducted around 12.5 k rupees from savings account, and next day I have sold the same shares with NRML type(363 which was pending from last day at Rs 198, I had called up customer care to know which type I should be selcting to sell the shares that are penidng on previous day, that asked me sell with NRML type),

however on next day i.e on Saturday from my saving account around 71.5 k rupees is dedcuted ( which I belive 197*363). Today since it is holiday for Bank and tradinng I could not connect to their customer service to know about the deduction.
My question was ,
1)What could be the amount 12.5 k which was dedcuted from savings account linked on first day
2) when I inquired couple of weeks back for NRML type, Cusomter service guys said if u dont sell shares on same day there will be some percentg of amount will be held (around 10%) , if so then next day why the complete amount 71.5k is again taken from savings account, why not around 59 k , if it converted to CNC (i mean 71.5 -12.5 = 59 k)
3)Since I have sold the pending 363 shares at the price of 198 ( (363*198 =71874) + 12500 = 84374), should I get the 84374 k amount back into my savings account by Tuesday/Wednsaday ?

I know it is long story , however I wanted to Confirm what they are doing is correct if not I need to close account immdiately to save my hard earning money.

Looks like the brokerage you are trading with is either a bank or else has POA on your bank account also as money is directly debited from your bank account. It will not be possible to comment on the process followed by the other brokerage, it will be interesting if you can fill us in, once you have the complete details on this in the next few days.

Hi Nithin,
Suppose I have 50000 Capital. I purchase 1 lot stock future for 30,000 and 1 lot Put option of same stock as a hedge for 10,000 and 10,000 cash left. What will happen when stock fall by 10% next day. Zerodha will trigger selling my future at what price.. will it will be sold after loss of 10,000 in future as after that margin requirement will break or will they keep counting my Option value as margin as well. so Is it possible that it won’t be sold, if option price increase significantly and generate enough profit (>=loss in future).. Please explain.. Thanks!

Firstly if you are buying futures and buying puts, you will get a margin benefit, you can use our SPAN calculator to see that.

If you start making loss on Futures, there would be a notional gain on puts, so we will wait as we understand that puts are hedging your position is above the SPAN required (not the SPAN + Expo, but only SPAN) for this, once it goes below that we will probably square off.

DAY 5: Margin required went down to 40k (From 50k 5 days back)
Now cash in my account would be 15k (40k cash which was already in my a/c + 15k sale
proceeds credited to my account for selling straddle – 40k current margin required)

DAY 8: Margin required went up to 60k
Cash in my account -5k (Shortfall of 5k to the required margin)
-> I have margin of 55k in place of required 60k. i.e, short by about 8.33% OR I have 91.6%
of required margin.
Question: Now my position wont be squared off even if i am not maintaining the required
margin – because i am maintaining above 80% of required margin right?

DAY 9: Margin requirement went up to 75k however total margin available in my account is 55k
i.e, 73% of requirement
Question: Now my position will be automatically squared off because the margin available in
my account is below 80% of the requirement right?

This clarity would help me a lot in starting my new strategy confidently.

Yes to both your questions, when the margin goes below 80%, it is not a guarantee that we will always square off positions, if we see that the positions are hedging each other (like in your example), we would probably wait for longer to help our clients out.

Sukesh, the rule of squaring off positions would depend completely on market conditions, so it will be tough to put an exact number on this. What I’d say is if the margin required drops less than SPAN (around 60 to 70% of the total margin), our RMS team can square off the positions.

One more question. I’m observing that the margin requirement in Nifty F&O is constantly going up.

Earlier i was usually able to write a Nifty straddle (Selling/Shorting both Put & Call at the same strike price) for about 35k (After considering the proceeds i receive for selling the straddle). However now the requirement has come up to 50k.

Is this a temporary phenomenon due to increased volatility because of upcoming elections OR is it due to the fact that Nifty is trading at very high levels now?

Can you also please let me know the factors on which the margin requirement depends on?

Yes Sukesh, there are two things happening, Nifty is up almost 12% in quick time and margin has also gone up by the same quantum. Secondly, with the expected increase in volatility, the margin requirements have also gone up, and probably will go higher closer to election results.

Due to higher requirement of Margin these days i’m finding it difficult to trade. Will the margin requirements go down once the perceived volatility stabilizes?

Also will the price level of the underlying play a role in the margin requirement? (Because i feel whenever Nifty is on high levels the margin required too are at high levels).
If this is the case it would be difficult for traders like me to arrange the margin amounts if the Nifty goes higher – Any suggestions to overcome this hurdle?

My assumption was that whenever the price of underlying goes up so does the margin required to trade in that underlying however as the margin required goes up.

My rationale was that the average margin required (i.e, Margin – Premium i receive for opening the position) should have been constant because if margin required goes up so should the premium i receive thereby almost nullifying the effect of increase in margins.

However this logic doesn’t seems to be working these days. Am i missing something here?

Hi, For CNC trades it’s bit disappointing not have any margin at all, I am a offline investor and put multiple order after market closing at low prices , if I am lucky I get my order executed next day. Now just to place a order I need to have money upfront !! Is something can be done for this?

Prashant, all you have to do is send an email to [email protected] asking to pledge your stocks, and we will provide you the margin based on haircut mentioned here: , for every pledge/unpledge there would be a cost of around Rs 60/scrip immaterial of the quantity.

me also facing the same problem
since having scrips for more than 2.50 lakhs rupees in the cash account
not able to buy even for shares for rs 25000.00 intraday or delivery base
rather it should be allowed
this one day or two days leveraged should be adjusted against cash or funds transfer or cash position squared off on third day
this type of facility should be there
ie margin against stocks in the account
I have another account with IIFL they allow such type of margin trading and with this we easily built up our portfolio easily than with Zerodha
I wish and request Zerodha to provide such facility

I appreciate the care and precautions you are following. I have one query though on how are planning to address this.

We observe that when there is a panic in market and particularly when we see lower circuit or upper circuit, most of the brokers disconnect their terminals due to their own mistakes on margins. I saw only one of my previous broker terminal on.

Can you assure that such thing wont happen here. Otherwise we can take positions accordingly in other accounts.

I hope you will understand the seriousness of my worry and not misunderstand me otherwise. Please pardon me in that case.

As you would have seen we are very conservative in terms of risk, and we don’t get into any margin funding activity which usually causes trouble to most brokerages. Also our margin utilization levels never exceed 60%, much lower than average levels of utilization at other brokerages.

My assumption was that whenever the price of underlying goes up so does the margin required to trade in that underlying in F&O, however even if the margin required goes up the average margin required OR cash required to trade (i.e, Margin – Premium i receive for opening the position/Writing Options) should have been constant because if margin required goes up so should the premium i receive thereby almost nullifying the effect of increase in margins.

However this logic doesn’t seems to be working these days. Am i missing something here?

Sukesh, when an option position goes against you the premium goes up which gets credited to you, but in essence this is a loss. So the margin blocked has to go up atleast by how much you have lost the premium, but the deeper the loss gets the bigger your position becomes and hence the margin required to hold this position goes up more than how much the loss you are incurring on the option position.

Currently MIS product in commodity requires only 40% of Overnight Margin.My suggestion is that the 40% limit may be little bit reduced (My Expect is may be 30%).It will give more opportunity to investors to trade and make good return.Other option is you may reduce this limit on request basis from the client. I agree that High leverage result in High Profit as well as High loss.Buy Disciplined Investor can efficiently use this leverage.

It is real time, and unless the market is very volatile most square offs would happen between 3 to 3.30pm. You can see the SPAN margin requirement on the trading platform itself after taking the position, and if you want to know the requirement before taking a position you can use our SPAN calculator.

Thanks again.. That leads to my next question again (I know i have lots of questions and might be bugging u.. )..

If i have a mixture of F&O instruments open in my account and the positions start moving against me, then which one will be squared off? Will all my open positions be squared off at the same time?

For Example, i have 3 open positions A, B & C.. I had sufficient margin when i opened these positions however as time passed it went against me and the margin requirement started to increase and the funds in my account were eventually not enough to even fulfill the SPAN requirement..

Now once the margin maintained drops below the SPAN requirement, which of my positions will be squared off first? A, B or C or All my open positions?

Sukesh, if we had to pick one among 3 open positions to square off, the RMS team would typically pick up the position which is making the highest loss. But all 3 positions won’t be squared off at one time.

Thanks.. The main reason for my confusion is because i am thinking which of my positions would be squared off if each of my positions are supporting other positions?
Say i have shorted a CE and a PE at the same strike price & going log on a future of the same underlying? Since each position is supporting the other 2 positions in some way how will a decision be taken on which position should be squared off if i am not meeting SPAN requirements?

Sukesh, if you are holding positions that hedge each other, the SPAN margin would come down, check our SPAN calculator for the same. But yes, it is best that you are always on top of your account and square off positions that you want to, before our RMS team does it.

Have a query regarding spread benefit. I have bought say 200 sep2015 nifty futures and after couple of weeks would like to hedge part of my position. So I would like to sell 100 oct2015 nifty futures. I know I need to provide the necessary margin required for the sell order. After my sell order is executed, would I get spread benefit as I am hedging part of my position even though mine is not a spread order?

On the 16’th of May, when I looked at my account cash limit, I had a negative account balance of -4500 rupees. I called the Zerodha helpline and tried to explain that I should be Rs 1840 in the money, not Rs 4500 out of the money, but I think the person who answered my call couldn’t understand my query and he kept saying that I had to deposit money in my account ASAP.

I don’t know why this has happened. Shouldn’t the profits from open positions be added to the losses to find net MTM ?? Please explain why this has happened.

When you short an option, only margins get blocked. There is no “Mark-to-Market” that happens on a short option position. Assume you buy a Nifty call option at Rs.100, and if on that day it closes at Rs.120, you will NOT be given credit of the Rs.20. The credit is realised only if you sell and close the long option position. Similarly if you short an option and are in profits, such notional profits will no mark to market. Only realised profits reflect on your ledger for options. Mark to Market happens only for Future positions.

What about losses on short options ? Are they deducted from from our account ? Because if I have executed a spread order, the loss on the short contract will be compensated for by the profit on the other contract.

sir cud u pls write a post on pledging mutual funds to provide collateral margins and how to accomplish this process online with minimum charges?
this would be beneficial to most of ZTraders as one can earn more or less constant interest on at least 70% of capital by investing in liquid funds.
sir will u provide mutual fund trading in future?

Ashish, presently we are accepting only stocks and ETF’s. Yes we will start mutual funds very soon.

this is how it works for stocks and ETF’s

Zerodha gives margin to its clients for the securities held in their demat account. The way it works is, the shares would move from your beneficiary account to our (Zerodha) beneficiary account through an Off-Market transfer which you have to initiate and in turn these stocks would be moved to the margin account. We would then provide you margins against these shares after considering NSE VaR margins and your limit would be enhanced on your trading platform. Whenever you wish to not receive these margins, you can just send us an email request to withdraw the securities held in our beneficiary account and we would in turn move them to your beneficiary account. The whole process would cost you Rs 60/- per line item regardless of the size of your transfer/scrip.

Please note that at all times you would continue to remain the owner of the securities that you have transferred and hence would be eligible for all corporate benefits, whatsoever. Such corporate benefits would be passed on to you.

Please note that Collateral Margins can be used only to take positions in F&O Segment and not any other segment. Every broker does this as a value-added service and not necessarily as a money making process. We understand that not all clients can bring in cash to trade and since securities are assets, we could give margin against such assets for the client to trade.

**To avail collateral margin facility on your holdings, you need to transfer the shares to our beneficiary account. As soon as the shares are transferred, you’ll get margin against those shares after the exchange prescribed haircut. For example, if you have stocks worth Rs. 100,000 in your account and if the exchange prescribed haircut is 15%, then the collateral value of your stocks will be Rs. 85,000.The Cash-Collateral proportion in your account for the position held by you will always be calculated in the ratio of 10-90. Accordingly, to utilize the entire 85,000 collateral benefit you will need to have a minimum cash margin of Rs.9444/- (85000*10/90).

Nithin sir , supoose i am using MIS product in intraday trading and places a limit order ,(buy at 100.10 rupees and sell at 100.60 rupees ) and as there is great fluctuation in stock ,how much time share has to stay at my specefied price for its execution.

sir,i want to open trading account with your company , please tell me the formalities and sir in MIS product leverage is provided in stocks , whether your company charge for the leverage provided on the actual amount and is yes then how much and can i trade in a single stock for many times in a single day

thanks sir for your reply ,sir if i placed a buy limit order 87.20 and my order did not get executed due to price time priority principle ,but if price of share falls below 87.20 (suppose on 87.10),whether my order will get executed immediately or again that price time priority principle apply on this.

if price comes below 87.2, that means all limit orders would have got filled at 87.2, only then will the price move lower. So that means if price goes below 87.2, you can be rest assured that your pending order is executed.

a. Auto square offs happen at 3.20pm, if you use the product type as MIS while placing trades. You can’t specify a time other than this.
b. margin for Nifty is 30k if you are using NRML and want to hold it overnight. So with 1lk you can trade 3 lots.
if you use product type as MIS instead of NRML, you can trade for intraday with 40% of 30k, which is around 12k. So you can trade 8 lots, but everything gets squared off at 3.20pm.
if you use Bracket or cover order, your margin requirement will be based on the stoploss of every trade. But will be around 10k, you can trade 10 lots, again square off at 3.20pm.
Check out our SPAN calculator.
c. No concept called dealers exposure, the above rule is for everyone.
d. Not applicable.
e. poing b explains the same, you need to have Rs 1lk in your trading account, that’s it.
f. Check out our brokerage calculator and charge list.
g. Didn’t get what you meant by break circuit .

Nishant if you place a limit order to buy at a price higher than the market price, it will get bought at market price immediately. So in your case if the stock is at 26.1 and you place a buy at 26.6, it will get bought immediately at 26.1 and once executed you cannot modify the order.

Hi Nithin,
I am both Zerodha and ICICI Direct user. ICICI Direct provides a intraday feature called OptionPlus only for Nifty ATM Options. In this, you can buy or sell ATM options with margin requirement of 40%.e.g. if i sell 7500 call 100 options at 100 rupees, I will need Rs 4000, same for buying it. One has to mention SL while entering the order which is a market order, and on that SL basis limit price is calculated which is generally 20% below/above the SL mentioned.

Considering that one usually keeps SL at 20% in options, and another 20% for limits calculated by broker, its very safe to provide trading margin with 40% of capital for intraday option trading for ATM options( strike points within 200 point range of current Nifty Spot Price). I understand that for OTM options this can be risky for broker as values can increase/decrease suddenly but for ATM options 40% is very reasonable margin requirement.

Request you to consider this at this is very useful feature to use intraday and I don’t want to pay heavy brokerages to ICICI!!

We have similar order types, Check out Bracket orders and Cover orders, we provide higher leverage if you use this. But we don’t provide intraday leverage for buying options, think it is just too much of a risk.

Nithin sir ,thanks for your answer sir.Sir please tell me if i buy stock in intraday trading and price of the stock falls so much that i cannot sell it without making loss sir and as it has to be square off before 3:20 pm ,sir can i convert that sell order into CNC and hold it for unlimited time .

sir ,full money means if i have 50000 rs in my trading account and margin limit is upto 5 times and i bought a single stocks of NHPC for 250000 rs and before square off at 3:20 pm {automatically} i have full stocks of NHPC which i have bought earlier for 250000 rs at lower price and cannot sell due to low price ,i can convert that full stock from MIS product into CNC

sir,as we know that in MIS we can first sell the share and can buy the share even after selling,sir suppose if i first sell the share at high price and want to buy the share at low price in MIS product and share does not reach at that specific prize on which i want to buy , can i convert that into CNC product {though i have first sell the share and want to buy later}

Presently you can trade on debt instruments, but can’t place them as a pledge because of liquidity issues. What you can do is use Liquid BEes for this, you can check the product note on liquid bees for this.

Thanks for the quick reply Nithin. Problem with Liquid bees as margin is that i effectively end up taking a long position on the market – i would ideally like to avoid such risk. How about a reasonably actively traded debt security like Nhai bonds?

the response to a query dated May 13, 2014 by Sukesh seemed to suggest that it is possible to take a short position even with just SPAN margin…just wanted to re-check if i understood that correctly. Do understand that margin of safety would be lower and position exposed to square off if SPAN margin is disturbed.

sir , whether zerodda trading platform can run on apple Mackbook air ?sir if we first sell in MIS product and want to buy later and cannot buy, can we convert the selling stocks into CNC and hold them and will buy the same quntatity stock later at lower price?

Nishant, like I mentioned earlier, you can’t hold a sell/short position in equity for overnight (if you want to, you will have to use futures). To convert from MIS to CNC on a short trade, you will need to have the stocks in your demat and if you don’t, you can’t convert.

Assume you shorted 10 shares of Reliance in MIS at 1000 and stock price went to 1010 making you a Rs 100 loss. To convert this to CNC, you need to have the 10 shares with you in your demat, otherwise you can’t. If you sell a share and hold it overnight, you will have to give delivery of the share to the person who bought it from you, so if you don’t have the shares in your demat, you will not be able to give delivery and hence not allowed

HI,New to zerodha some clarification needed bought one lot of DLF future on 02/07/2014
in Normal mode and carried it next day,as market was not favourable sold DLF on 03/07/2014 under MIS mode…now what has happened here is system has again bought DLF lot at 3.20 pm…
means my DLF position from previous day is open and to exit this position what should i do?

Rajas, whatever is bought or sold as MIS gets squared off as an intraday trade. So you will be still holding 1 lot of DLF in your account. You can exit that only tomorrow, but from next time if you have bought as NRML, make sure to sell as NRML itself.

sir,what is the concept of buying in cash market and selling in futures and how it works and after buying in cash market and selling in futures ,wheher our transaction is completed and we need to do smething else? and same thing in first selling in futures and then buy in cash market? sir ,it is a humble request to introduce your software on apple products because i have spend money to buy another laptop to deal with your company sir,

Nishant, what you are talking about is also called Cash Future arbitrage. If the difference between the stock price and futures price is different from the theoretical price, then this strategy can be employed. So if Reliance is trading at 1000 in cash and future trading at 1020, you can buy 250 shares of Reliance and Short 1 lot of Futures. On the expiry day both cash and future will be trading at same time, at that time the idea is to reverse this trade and earn Rs 20 as profit. Check this post.

hi, sir new to zerodha .,want to arbitrage in futures by buying in one expiry date and selling in another expiry date? will it be possible on intraday basis?{ example buy one lot in july expiry date and sell in september expiry and whether MIS product can be used or NRML product will be needed?

sir , there are three expiry months and month of july is in process , is it possble to buy in the month of july , the stock of august expiry date and sell it on the same date on intraday basis? ILLUSTRATION { suppose today is 13 july and on this date i bought HDIL share of august expiry and sell on the same day and took profit } sir why there is so much difference in price of same share in july expiry and in august and september expiry , sometimes there is even a difference of 6 to 7 rupees? how can arbitrage be done on the same share in three different expiry {sell the september series and buy july series of same share?

sir, the fact is that i does not understand the link , please request to you to answer my query in simple language and not from links, i hope i am not disturbing you by asking questions again and again?

Nishant, your question is quite broad and I will have to explain you from the basics of pricing on futures. Check this, you have a link to take a course in intermediate modules called Derivative markets dealer module, read this module up and you will have a better understanding of how futures pricing works. But what I can tell you is that calendar spreads (buying one month futures and selling another month futures), might seem like an opportunity, but what you need to understand is that if something seems too easy to earn, the opportunity probably never existed.
This said, we at Zerodha are starting a new online education initiative to help people get started and learn from the basics.

will that be ok if i first sell the scrip in futures and instead of buying i square off the position so that my order of buy automatically get filled at the price going on in exchange on buy side ? and as i know that market type order get executed immediately on exchange at the best possible price { will it be possible that a sell market type order, when the scrip is trading at 1234 will get sell at 1230 or even more less }

as per the span margin calculater, i need 48000 rs margin for my positions( for buying and selling some options). i traded it intraday basis by using the basket order, so the required margin is 48000 X 40 %=19200
as per the span calculator. but in the trading platform rejected my order and asking a 30000 margin. what is the reason?

Dins, SPAN calculator shows you the margin requirement after taking all the positions. So, if one of your positions is giving you a margin benefit, you get this only after taking the positions. Don’t use the basket order, and place each one after the other, and it will work. The other thing is, if you want to execute using basket, ensure that there is extra margin to take care of individual orders, once all positions are taken, the margin blocked will be as on the SPAN calculator.

HI, these tools – margin calculator / span calculator should be easily locatable from your home page. (am sorry, if i missed to locate it 🙂 ) currently we need to search (either in google / in your search box) in order to land to the necessary link, which will pose a problem for the users

Hi Nithin, Thanks and yes i saw that.. However https: // zerodha.com/ margin-calculator/ Equity/ link is missing there (Margin Calculator link). Currently i could only access it by coming to this blog and then clicking on the link that is provided in the blog. It will be good if you have this shortcut also in the technology page (along with other calculators you have there like SPAN, Brokerage Calc etc)

hi nitin, suppose nifty futures is trading at 7700 and i buy a call option that nifty will rise before expiry date and premimum at that time is 80 rs , first what actuaal amount i have to pay to buy 1 lot of nifty , and suppose nifty does not rise before the expiry then what are my losses if nifty falls to 7600 , any estimate how much premimum will fall if nifty goes to 7600 , if the premimum is 80 at 7700

If nifty futures is at 7700 , and i buy call option that nifty will remain above 7500 , is it possible ?and then what if nifty close at 7600 but above my target of 7500 , but the question in my mind is that when nifty is at 7700 , then if i paid a premimum of 100 rs to buy call option at 7500 , but if nifty close at 7600 ( above my target) premimum falls to 90 , whether i still remain in loss , even if nifty close above my target?

Nishant when Nifty is at 7700 and you buy a 7500 call it will be trading at a minimum of Rs 200 (if it is early in the month as much as 300). So if you buy it at say 250 and if Nifty closes at 7600, the 250 will be come 100 and you will end up losing 150 points. You need to start from complete basics Nishant, try to search for some online course on F&O, You can also take the NSE derivative market courses, check this.

Hi nithin,
Suppose I am buying 1 lot of nifty of October expiry.And say the amount is 30K.And I have 31K in my a/c.So my question is that whwn my MTM exceeds -1K will it be squared off automatically or is there any idea of MTM=80% total vavailable cost (if so what will be considered as available cost 31K or 1K?)

Sayan, exchange puts a penalty in case the margin in your account drops below the SPAN margin requirement. For Nifty the SPAN requirement is around 19k, so we usually will square your positions off when it is around 15% above this level (so at around 22k for Nifty). You can see SPAN margin requirements by clicking on the PDF link Equity SPAN margin (PDF) on the right top of the table.

Wanted to know whether the margin created by pledged shares can be used for delivery of Future & options or not. So suppose one has pledged shares worth 1,00,000 and after haircut the margin amount available is 80,000. If then one writes an option with margin requirement of 60,000, Can that position be carried without adding cash margin or Will it be squared off at 3.20 p.m if no additional margin is given?

Thanks for these detailed explanations on margin policies.
I have few simple queries

1. For Intraday Equity trading, the Equity calculator page gives only around 239 stocks in that list. (Leverage of 3 to 10 times). I am sure that so many stocks could’nt be offered leverage. So the stocks which are not in the list, can I consider as 1x leverage. I mean I will buy stocks which are not in the list as MIS product type, provided I have sufficient margin in my account to cover for the entire cost of shares. (as if like CNC, CNC brokerage and charges are higher, so if I am sure I will sell those shares within the day, I can go with MIS fetching low brokerages)

2. These margins 3x, 6x , 9x etc are zerodha specific margins or it is common between all brokers (as if stipulated by NSE)
NSE provides Equity Calculator, with VaR margin etc., and says margin requirement varies everyday based on volatility. So Is zerodha margin calculation also varies in real time/every day or it is frequently changed at regular intervals. If so what is the interval. When is the last time the 239 scrips updated for the margin it is showing currently.

3. For example, if NSE gives margin around 5x and in zerodha margin page it shows only 3x (Is there a chance for this, I dont know, since NSE margin requirement varies every day), will my order gets executed even if I place 5 times the margin I have in my trading account. Will zerodha platform by itself will check for margins before placing the orders to NSE? Or the orders get placed and NSE rejects the order if it fails to meet the NSE margin requirement? In later case 5x may get executed.

1. Yep
2. Zerodha Specific, every brokerage will have a different policy based on their risk tolerance. This has nothing to do with NSE VAR, we have our own internal formula to calculate it. Changes only at the end of the day, usually a change only if there is tremendous volatility in a stock.
3. As I said, there is nothing called NSE gives margin. When you buy or sell stocks, NSE will ask for the entire money or entire shares respectively. Because you commit to trade intraday by using our product type as MIS, the brokerage gives you the additional leverage.

Understood. Thanks. Very clear explanation.
So for stocks which I have bought under 9x for example, (margin amount blocked say 5000, and I dont have any margin left say my margin left is only 50 rs after blockage, If I make a loss in that MIS stock of more than 5000 or 5050 (which one I dont know), will the stock be automatically squared off by zerodha? Is some team monitoring for this square off or it is done automatically by the system.

I know the leverages are calculated based on volatility and there is really a very rare chance I make a loss of more than the margin which got blocked. Still wanted to know what would happen in such case.

I want to do calendar spread in futures in nifty , difference between august and september nifty is 50 and i bought 10 lots of nifty (500 ) and i expect the price to reduce , suppose price reduced to 48 , my position will get automatically clear on falling of price or i have to do something else?

Your system blocks margin first on pay-in, then on pledge. Due to this, pay-in money is blocked and not available for withdrawal even when margin on pledge is available. My customer ID is: RM0079

Highlighted this twice to your support staff, but the response is the same. My experience is that your support staff is only trained to provide standard answers (copy-paste), and not to look at exceptions or to forward exceptional queries to knowledgeable people.

On the ledger, the margins that get blocked is on the cash balance. However when we are processing payouts, we will block only 10% of your total margin blocked in cash while the other 90% is blocked out of collateral margins provided you have sufficient collateral margins. After blocking 10% from cash balance, if there is any extra cash in your account, you can withdraw the same.

If you view your ledger, you will see a negative balance of 91000. However while processing payouts, we will only block 10% from cash. In this example we will block 12300 (10% of 1,23,000) from your cash balance leaving you with a withdrawal balance of Rs.19700 (32000-12300)

Firstly, there was no need to write my name in your response, when I have not mentioned it in my comments. Client confidentiality should not be taken lightly.

Secondly, nothing irritates a client more than highlighting the same thing multiple times and receiving standard responses even after highlighting to the CEO. If you had gone through my specific case, you would have known that: (1) I have pledged Liquid Bees where the 10% blocking does not exist
(2) the screenshot I sent to [email protected] clearly showed that the withdrawal amount is more than the account balance, but while withdrawing the amount, there was an error saying that “Insufficient Equity balance!”. The withdrawal amount shown was correctly shown, but the system did not allow me to withdraw even 2/3 rd of the amount shown there, which meant there was a system problem
(3) as of yesterday night too, the situation in (2) remains, ie, the withdrawal amount is more than the account balance, but while withdrawing the amount shown in withdrawal amount, there was an error saying that “Insufficient Equity balance!”.
(4) if you take my account detail and manually calculate, you will have the same conclusion.

Did have a look at the screenshot. However we aren’t able to replicate the scenario. Ideally you should not have faced any issue whilst placing the withdrawal request. While we checked in the test servers, the withdrawal request was going through.

In case you face this issue again, please shoot an email to [email protected] and I’ll have this checked immediately & will fix it once and for all in case there are any issues.

If i want to enter a F&O position which say requires a margin of 10k (SPAN – 8k, Exposure – 2k) but i have around 9k in my account.

Now i take the same position Intraday so the margin blocked is about 40% of Overnight position i.e. around 4K.

Before the market closes i plan to take this position overnight, now the cash in my account (9k) is more than the required compulsory SPAN margin of 8k but less than the required overall margin of 10k.

Will i be allowed to convert my intraday position to overnight, with total cash of 9k in my account?

I have to pay up entire margin amount (SPAN + Exposure) when I enter the position.
However once I enter the position, in case the position goes against me, I would be allowed to keep the position till I touch the SPAN requirement levels which is around 80% of the total margin requirement.

If the position makes further losses (does not maintain SPAN requirement) then chances are your risk management team will square off my position?

hi,
i wish to know how can i sell stocks before they come to my DEMAT account. Is it possible ? And what happens to the funds ,do they reflect in my trading account as soon as i sell stocks . for eg i buy 100 shares of reliance on CNC order(Delivery) , now can i sell them on the same day or next ,before they hit my DEMAT account. if yes, then can i trade on the same day again with the money from the proceeds of selling those shares.

Yes, you can buy and sell using CNC during a day, it will be considered as an intraday trade, yes the funds will be available immediately along with the profits you made or minus the losses you made on the trade. Yes you can buy CNC and sell next day, this is called BTST/ATST. Check this post

Hello Nitin, I have a query regarding margin provided. My friend opened a trading account with a broking house, where only 6500 margin is required to sell an out of the money NIFTY call. Is ZERODHA also thinking of reducing margin requirements?

Yes you are absolutely right. I was misinformed.
However, I went through the details and observed that there is a difference between zerodha and other brokerage in following scenario:
Current Nifty 8100 –
Sell 8600 Calls + Sell 7600 Puts

Zerodha charges – 48,906 Rs total.
However the other brokerage charges ~ 20000 Rs. Note that this is not intraday margin.
Is it that they are charging only one way considering that there could be risk at one side only?

Kailas, margin required for holding positions overnight is as stipulated by the exchange and there is be a penalty in case it is blocked lesser than what exchange says. My guess is that you are comparing with what the other broker is charging you for intraday with ours which is for overnight.

Just want to ask why the margin for cover order for Futures has been increased recently,it has been doubled for each lot, I really love Zerodha for initiatives like crowd.in etc but with this change iam really disappointed..iam a high frequency trader,for me margin and lot size is everything.. i trader with lot of brokerages like angel,infoline but i find Zerodha is the best..but with this change iam really disappointed

Most of the stocks like india cement,oriental bank of comm,justdial,crompton,jubfood…they used to show for 1 lot as 9000 or justdial it was 4000…now they are showing as 24000,31000 it is almost 2-3 times you have increased..it was done couple of days back..Please look into matter as it hampering my trading plan.may i know the reason why do you increase the margin when the stock becomes volatile or Could you introduce a product for High Frequency trader who trade intraday with less margin for F&O with a monthly plan of 1 lakh like that..it would be helpful.

2) Suppose next day nifty is up by 20 points at 10 a.m.and i bought nov futures and close the Position of nifty nov futures . and i waited till 11 a.m. by that time nifty was up bu 50 points and I sold my oct nifty position . Now during 10 a.m. to 11 a.m. I had only one position i.e. Oct. nifty and margin required for that is around 32,000. Once I clear One Of position from above do I immediately need to deposit the margin or how will It go? Can you please explain In detail.

1. No, you will need atleast 31k to enter the positions as the margin required to enter the first lot is 31k.
2. Yes, if you exit one of the positions in the spread contract, you will need enough margin to hold the other. If not, the positions could get squared off by our RMS team immediately.

I believe total margin is SPAN margin plus additional margin (RMS margin) – I believe the SPAN is calculated based on volatility and VaR and mandated by exchange; how is RMS margin calculated at Zerodha?

Also on related trades (e.g. selling a CE option covered by purchase of future contracts) SPAN calculator shows there is a margin benefit; does a similar margin benefit apply to RMS margin as well?

let’s say I trade in options of two different companies A and B (e.g. TCS and INFY) in the following manner:

For the sake of simplicity let’s say both A and B today trade at Rs.500 each, lot size is 1000 shares.

At the beginning of the month:
I sell 10 ATM CE contracts of A for a premium of Rs. 20/option = receipt of Rs. 2Lacs in premium and margin blocked (total, SPAN + initial) is Rs. 10lacs
I buy (at the same time as above) 10 ATM CE contracts of B for a premium of Rs. 20/options = I pay net premium of Rs. 2lacs. Since I’m long CE options here, there is no margin; also there is no margin benefit.

Now let’s say I hold the two for the till the middle of the month (say 15th) and the prices of stock for A and B are Rs. 110 and 112 respectively.

Clearly the margin that I paid initially for shorting CE options in A is completely eroded because of the increase in prices BUT at the same time I have made a lot more money in options for B. Also volatility for B prices is more.

My question is:

Would I get a margin call in the above scenario if I haven’t liquidated any of the two positions on 15th, or would my unrealized gains in B cover the risks on my short options in A (to some extent at least, if not to the fullest extent)?

Yes, you will get a margin call because you won’t be having any funds to hold your short call position. Your profits from B is just notional and hence won’t be good to cover margin requirements for A. Also, exchange will charge a short margin penalty if you hold position without the minimum SPAN margin in your account.

As the market is going up after elections i see that the margin requirements are also going up for trading futures & options.
In many cases the margin requirement is illogical and ridiculously high.

Few days back you had invited for feedback from trading community which you will pass on to the stock exchanges – can we give this as a feedback to reduce the margin requirement to logical levels? Is there any relief we can expect in near future from margin requirement perspective (specially on Nifty f&o)?

Check the circular here: https://zerodha.com/marketintel/Circulars/ , yes 1 lot will be split into 2 automatically for Nov and Dec contracts. Margins will also automatically drop per lot, as in you will be able to trade 1 lot with around 15k in your account.

hi nitin, is it right that lot size of nifty is decreasing to 25 per lot and if yes , then why ? and my another query is that what is the margin requirment for option writing of one lot of nifty { if lot is of 50 shares then what and if lot is of 25 shares then what} and is the margin same for call writing and put writing

I guess the reason for doing this is to improve liquidity, as the margin requirement per lot had gone up quite a bit with Nifty going from 5000 odd levels to 8000. Margin requirement will basically drop by half, so if you could trade 1 lot with 30k, you will need 15k to trade 1 lot from now.

hi nitin, suppose i write deep out of money call or put option at premium of 10 and on expiry premium comes to 0 or 0.05 which i will not be anle to buy , nithin then what will happen to my capital on expiry?

thanks nitin sir for answering my query, one more thing as you told that my money will come back on expiry in deep out of money option if premium comes at 0 , but will it come with profit or not and my another query is that if i need cash earlier can i square off my position earlier and will it get squared off at the going buy price premium

In the daily margin report there is a section “Margin required byExchange/NSCCL” that has three columns “Initial Margin” “Exposure Margin” and “Total Margin” . In all my reports it doesn’t show any Exposure Margin, the column is blank.

Then there is a section “Additional Margin required by member as per RMS” This shows some margin as well.

If I use the SPAN calculator, that show SPAN margin and Exposure margin which are broadly in line with “Initial Margin” and “Additional MArgin requires by member as per RMS”

Is the above the intention of the Daily Margin Statement?

Second question?

Assuming the above is correct, you had replied to Sukesh on 06 Sep above that automatic square off will happen once available margin falls below the SPAN margin. Does it mean that while when the “Additinal Margin….” may not be fully available in client account, as long as SPAN margin is available Zaerodha will not square off the positions (but client may be advised to square off on his own)?

Third question:

Does you SPAN calculator https://zerodha.com/margin-calculator/SPAN/ work exactly as the exchange calculator? I just entered my position (I had traded three days ago) into the calculator and the margins are larger than in my daily statement (the exposure margin is slightly larger, about 3-5%, that the “additional Margin …” column in my statement; the SPAN margin is a lot larger, about 15%) . If the SPAN calculator is not exactly what you internally use that is OK, it is a pretty good estimator (and slightly higher margin requirement estimate can’t hurt), but knowing that would help.
Also Is there a difference between margin requirements if a position was acquired a few days ago (and has consequently made MToM profit/loss) vs you are trying to enter that position now?

1. additional and exposure margin mean the same.
2. Yes, if the margin drops below SPAN is only when we square off for your NRML positions. And that too this is typically done only by end of the day (between 3pm to 3.30pm).
3. SPAN calculator is not live and can’t match exchange margin requirements to the tee. There can be upto 10% difference at times, but yes most of the times it is within a 1% range. Typically when big market movements happen, like yesterday, exchange margin requirements go up during the day. This is not captured by the SPAN.

Just saw a very interesting thing – The Exposure market in SPAN calculator matches (exactly; within 25 paise; the difference is due to rounding error) the Exposure market in the Daily Margin Statement that came on Nov 31.

The SPAN margin matches the SPAN margin (exactly; the difference is Rs. 0) in the Daily Margin Statement that came on Nov 30 !

Looks like your SPAN calculator is using more up to date data for Exposure Margin 🙂

In the hypothetical case that, after a volatile day, my account doesn’t have enough to cover Exposure margin fully but SPAN margin is fully covered, does the exchange levy any interest/penalty in such a case?

One thing i am observing is that as the markets are going high so are the margin requirements.

As per my logic the margin requirements is (somehow) proportional to the option premiums. So i was thinking that option premiums will go high as the margin requirement goes higher but this doesn’t seem to be happening. Is there some reason for this or am i missing something?

The reason i said that the option premium goes up as the value of the underlying market goes up is because i made a simple calculation using the Black Scholes option calculator.

Keeping everything constant (i.e, Interest Rate, Volatility, Time for Expiration & Dividend yield), i found that just by increasing the price of the underlying, the premium of ‘At the Money’ option increases considerably.

I have attached the screen shot from options calculator for reference.

Of course Sukesh, if you have bought 8500 calls and market goes up, the value of 8500 call will definitely go up. That is because ATM options would have now become ITM and that would mean that for every point movement of the underlying the option premium also goes up by the same.

hi nitin , if there is no volume on 9800 call option { whaether it if for one month expiry or it will be long} , shall i be able to buy it or in other words how to buy something or write something when there is no volume at all in that definite strike price?

nitin , i bought 9000 call option in nifty , my query is that even nifty is moving higher , but the premium in 9000 call is falling slowly ? whats the reason for that ? is the same thing happen in stocks also ?

Nishant, you have bought deep out of the money option, so Nifty has to move significantly from the current 8300 odd levels for you to see any uptick in the option price. Buying deep OTM options, are like buying a lottery, the chances of getting it right is very very slim. Btw, do post such questions on general market related queries on http://tradingqna.com/

hi nitin , the open interest data which gives clue about f&o market , how to check it and whether increase or decrease in open interst is check fro future data or from option data of that definite stock and how to see where there is call writing and where is put writing and there is increase or decrease in open interest in different strike prices , sir how to judge it

thanks nitin,its really help me , i understand all the thing but a question is still in my mind that whether to watch open interest from future stock alone ( like idfc stock , to watch its open interest whether to see its future stock price or its option stock price of the strike price going at futures ) and if have to watch live the open interest data where have to see?

Nishant, why don’t you ask the same question on the tradingqna link. This blogpost on margin policy has nothing to do with the question. By asking in the right places, will help anyone else in the future having the same question. 🙂

hi nitin , today i write 1000 shares of nifty of 8700 call option and nifty is trading at 8410 , if at expiry nifty closes at 8600 , but premium of 8700 call increases , then will i incure loses or i will be in profit because nifty closes below the level of my writing point of 8700

sir, i want to know that what is difference between contract traded and open interest , because today when i writing 250 put of SBIN { and stock is traded at 295} , contract traded are very low { around 110} but open interest is in lakhs and i also want to know that though it is the month of nov but can in trade in stock options of dec contract in last ten days of nov contract and whether volumes are enough there to trade in last ten days of current expiry

Contracts traded (volume) is something that is happening on that particular day. Open interest refers to the number of contracts that are active for that particular scrip. Total Open Interest refers to the total number of active contracts for that entire derivative chain. So even if very few contracts were traded today, it’s possible that a lot more were traded before. Also, since the stock split happened for SBIN everybody’s contracts just increased 10 fold. 🙂

The volume on the next month contracts are always gonna be much lesser than the near month contract until the near month contract has expired. You can enter positions, but you can’t expect a high amount of liquidity.

thanks sir for your useful information , but if contract traded for a particular trade is low ,but open interest as i say is in lakhs , so then there is no difficulty in either buying or writing that particular srip , even if contract traded is very low? and another thing i want to know is whether STT applied in writing options on premium ?

thanks sir for your information , but i want to know that suppose there is last date of expiry and nifty is trading at 8400 and CE of 8600 is at 15 rs premium and i write 8600 CE on the last expiry date at 15 rs premium and somehow nifty reaches 8500 but way below the level of 8600 but the premium of 8600 CE increases to 20 rs , and i am incurring the loss of 5 rs premium , but i want to know that will i incure loss or will i make profit due to nifty closing below the strike price of 8600 and if i make profit , what will be the profit if i write 4 lot of nifty .{ will the same thing applies to stock option also}.

🙂 Nishant we will very soon have a module on F&O on Varsity and will help you with your option basics. If you write 8600 CE and Nifty closes at 8600 or anything below that, the entire premium that you would have received would be your profit. So if you have shorted at Rs 15, 4 lots or 100, that would mean profit of Rs 1500 as profit.

i have already a account in zerodha , want to open another account for my brother who is living in USA , can i open it on my mother name and can i connect my bank saving account which is already connected with my account with the new account and please send me the link of account opening form and you guys are really great , hats off to you for operating this blog

I have a query, if I buy some ‘X’ share at Rs.100 in CNC with an amount of Rs.100000 of 1000 quantity for CNC and 10000 quantity for intraday, same day if I achieve my target and booked profit it will be converted to intraday as per my understanding so will you increase my quantity to 10000 though I have bought on CNC?

Didn’t get your question correctly. If you have 1000 shares as CNC, it will remain like that and the shares will be credited to your demat account. If you have bought another 10000 quantity as MIS(intraday) it will get squared off at 3.20pm automatically. If in this 10,000 you want to convert 1000 to CNC, you need to do it before 3.20pm.

Yes Akshay, keep looking up Varsity our education initiative, we will very soon have the module on F&O on that.

Futures are leveraged products, so to buy 8000*25 = Rs 2lks worth of Nifty, you will need only a small portion of it also called margin. Margin for trading Nifty is around 9% of the contract value, so in this case it should be around Rs 17000 to Rs 18000. (what you see on the margin calculator link).

IF you shorted at 8000 and bought back at 7990, your profit will be Rs 250 ( 10* 25).

So it is as good as margin leverage provided by you guys on equity intraday but here the leverage is straight from exchange.
If.. in a not so happy day 😀 , i am shorting and nifty future goes up 9% its as good as 100% loss and product will be auto squared off.

nitin , on your zerodha page , i watched out STT trap link and completely understand it but when i watched a similar question on trading q&a , there a different answer appears and it is written that even if you write options and let it square off automatically on expiry date , even then you will attract an higher STT on whole of your contract value , what is that , i thought that if we write options we have already paid the STT on premium, then why it apply to whole contract , please clarify it ?

nithin, i am downloading the form from your site , but there is one section of trading account form and other is trading and demate account form , let me tell you i want to do option trading in futures and option on NSE and BSE and want to do it intraday and positional and please send me the correspondence address of zerodha where the form has to be send

nitin , today at 3.20 pm when i decide to write 17800 put of bank nifty going at 11 rs premium , i place the order at 11 rs , it does not get executed but at 3.23 pm, i reduce the price to 10 rs , it gets executed immediately , i just want to know why even the sell price is at 11 , my order does not get executed and when i reduce the price to 10 , it get executed , whether it is because of expiry or something else ? please reply me i put this question on trading q&a but does not get satisfactioraly reply , so i thought it will be good to ask you.

That is how markets are demand and supply. At Rs 11 there was no demand, at Rs 10 there was. It is not because of expiry, that is how markets are every day. I try to sell you apples at Rs 100/kg, you don’t want to buy it. If I reduce to Rs 80/kg you probably will buy it. Do be more specific when asking on tradingqna.

Hi NITIN, today i ask a question on trading q&a that whether options on NSE and BSE are American or European , it got a reply that in both exchanges options are European , but one day i write nifty option and i got profit on same day and then i buy it , then what was that , why i am able to buy it after writing the same if options are of European style , it creates a lot of confusion , please you must clear it and if possible please in detail.

Both American and European options, can be bought and sold or vice versa on the same day. The difference in American and European is that all European options can be exercised only on the last day of expiry. In Indian context where all options are cash settled, the difference is hardly any. We are putting up detailed discussion on this in http://zerodha.com/varsity

hi nitin , just want to know whether the principle which applies in option writing on NSE that if in put writing nifty remains above over strike price and if in call writing nifty does not close above over strike price , writer will kept the whole premium irrespective of the fact that premium has increased ,will also apply on option writing in sensex index of BSE in weekly options and monthly options and also whether volumes on weekly options on indexes will available on only last day or are also present one day early before expiry?

hi nithin,i am checking the put call ratio , there is 0.85 ratio on put side and 0.92 on call side , then how we know what is the final put call ratio , whether there will be average by combining these two ratios?

hi nitin , i know this a little bit personal question but i cannot stop myself from asking you , when you are a trader and when you write options , did you use any software for your help or general mood of market , put call ratio , world market view , indian market view are the factors which you take into account in writing options and what is your average profit percentage per month in the market ?

Varun, you can use our SPAN calculator to have this checked. For intraday, we ask you for 40% of the overnight margin requirements (that is around 2.5 times leverage). If you use products like Cover order and Bracket order (which have compulsory SL) this reduces to 25% or 4 times leverage.

PCR will be 313…/360… which is 0.86. PCR in itself doesn’t mean too much, you have to see how it is trending, generally lesser than 1 means more calls being written (which could mean bearishness) and over 1 meaning more puts being written (which could mean bullishness). Best to see how PCR changes with change in market, this might be more insightful.

there seems to be a change in daily margin statement – earlier the Column titled ” Additional Margin required by member as per RMS ” used to have the exposure margin and the “Exposure Margin” column used to be empty.

For past several days it is the other way round; the Exposure margin is showing in its proper column.

Did anything change in Zerodha policies and/or regulations from SEBI/NSE

Also you had earlier written in this blog that in case of margin shortfall, Zerodha will not automatically square off positions as long as there is enough money to cover the SPAN margin (even if there isn’t enough to cover Exposure+SPAN) – is that still true?

I’m not planning to keep outstanding margin, the question is to deal with conditions of high volatility when the available margin may dip a little below SPAN+exposure requirement (e.g. by about 20% of the exposure margin requirement; may be 5-7% of the overall requirement) for perhaps a day, may be two (near a weekend). At the time of entering the position I keep some extra money in the account; however if the market turns suddenly then I may not realize in time that margin has gone low before the market close. My positions are always cross-hedged (small in individual securities; overall hedged by both long-short in options) such that shortfall even with a 10% single day fall in any stock or broader index will not cause margin to go below SPAN.

My problem with “discretion of our team” is – they may not understand what is going on and may square off the wrong thing. Zerodha doesn’t give margin calls so there is no way I would be able to close a few positions on my own. And as last week has shown I may not even be able to logon to the system even if I had an idea that something is going wrong.

Hence the question about square off – Nithin had earlier on this blog (on Nov 1 and Nov 4) commented that positions will not be automatically closed as long as there is enough money to cover SPAN margin.

Here are two other questions:

(1) Earlier Nithin has written in this blog that the interest chargeable is on the amount by which margin is short over the SPAN-only. If there is enough money for SPAN but not enough for SPAN+exposure then NSE will not charge interest. Is that still true?
(2) whether there will be automatic square off of positions in case SPAN + 50% of the exposure margin is still covered by the cash available at 3:20PM (perhaps with some sort of an email warning to close the positions next day)?

This also leads to some feedback from me – on the new platforms and software you are planning perhaps it may be a good idea to generate some automatic alert emails if the margin is going in dangerous territory and/or too much volatility is suddenly coming in. Even if we do have funds, mobilizing them into your accounts may take a few hours and better to have some forewarning.

1. Yes the NSE penalty comes into place only when the margin is below the SPAN margin requirement, and not below SPAN+Exposure.
2. We don’t typically square off positions if the minimum SPAN is present in your account. But that said, if markets are extremely volatile, we square off positions upto around SPAN+50% exposure. But if you have this much covered, we won’t run any square offs.

Yes, sending alerts on margin is something that we definitely intend to have in the things we have planned for future.

just want to conform from you thats why i am asking here , on trading q&a , somebody has ask a question and answer to that question is contradictory from your answer earlier given , question is , due to low volumes on BSE deravatives , it gives incentive to traders to trade on options also which does not have any open interest and whether the traders which trade on it have to do intraday or can carry position till expiry ? the answer to that is it can be carried till expiry , but in one question you have answer that it has to be done intraday , so can you please just clarify SIR!

hi , whats the margin required for doing cash future arbitrage in nifty and do this facility is available at zerodha and last i am reading a article written by IDFC mutual fund that whatever may be the condition or something else , you will always remain in profit in cash future arbitrage in nifty, is it true?

hi sir , sir i have asked this question so many times on trading q&a but does not get the reply , i want to know how to do cash future arbitrage in nifty 50 stocks , just like jsw energy in nse at 101.75 and on futures at 103.95, if i want to do this arbitrage hows it is possible , can it be done on intraday basis and how the transaction will be completed .

hi nithin, actually i today open account with zerodha but does not know from where to transfer funds and other things , is there any videos provided by zerodha for guidances , please guide , getting confused !

Penalty is charged by the exchange when the margin in your account is lesser than the minimum SPAN margin required for the futures. So for Nifty 10 lots, if SPAN is 140k and your account balance becomes 100k. So for this shortfall of Rs 40000, you are charged a penalty of 1% which is Rs 400. This is 1% per day.

hi within, i want to know if i write currency option on last date of expiry and if i pocket all the premium of that strike , when zerodha will release my whole amount with the premium i pocket back to my account and another thing i want to know when NSE directs the brokers only to collect the span margin from clients in option writing why all brokers with you also collects both span and exposure from clients?

hi , i check your span calculator , for writing one lot of currency options span is very less but exposure is very high , why that sir and whether exchange also demands so much exposure margin or it is your company risk managment policy , and whether the same thing applies in nifty options writing because i am checking NSE margin , there is no mention of exposure margin in option shorting and in currency option shorting and only span margin is mentioned there?

Arvind, whatever SPAN + Exposure we charge is what exchanges ask us to. We are one of the few members to clear with the exchanges on T day, so our margins are lower than most brokers out there. Same with currency and equity options.

whether there is anyone like its member who directly do trading with exchange gets benefit of lower margin { only span} , watching today all snap quote windows on zerodha , in 9900 CE someone is writing 85000 share at 2.10 , it requires so much capital , thats why i am asking you?

Arvind, out of the 1500 odd members on NSE, only 400 or 500 are retail brokerages. The rest are doing some kind of proprietary trading, and with decent amount of capital. So yes, there are many such professional trading firms sitting on big capital who like to short and especially out of the money call options.
The margin requirement is same for everyone.

Example: Natural gas trading at Rs 165. I want to place a buying order Rs 166 and stop loss 160 with a target 168.
Q1. By selecting product type as MIS how can I handle this situation?
Q2. Is there any extra margin required to place 3 order at the same time when none of these get executed? Plz explain

1. Buy SL-M trigger 166 , Sell Sl-m Trigger 160, Sell limit 168
2. Yes, since you haven’t taken any position, margins will be charged for the 3 orders separately. Once your position is entered, margin will be blocked for two – your open position & one of your exit orders.

🙂
1. Haircut is 10% on liquidbees, so if you put up 1lk, you get 90k in margin.
2. Currently we don’t ask for any cash, but it is best to keep some in the account in case of any MTM losses. If there is no cash, we will square off your position to the extent of the losses.
3. If you have cash balance, it gets adjusted with this cash. If there is no cash, liquid bees gets squared off to the extent of the losses.
4. No
5. Every broker who allows you to trade online takes a POA on the demat account. The POA is limited power and can be used only to debit shares from your demat account. This is required because when you sell shares, without the POA we will not be able to debit and provide those shares to the exchange.
6. A round trip of pledge/unpledge costs around Rs 60/pledge irrespective of how many liquid bees you pledge.
7. Yes you need to open a demat. Cost is Rs 550 which includes upfront AMC of Rs 400 for the first year.

I want to know is there any option of intraday margin trading where i can keep the position open for 5 days like the client mode trading of icicidirect. Do i need to square off my open intraday positions the same day? or can be kept open for any specific number of days, this is helpful when the market tanks sometimes and the next day is up, it helps to reduce/convert losses into profit.
Thanks

Param, the exchanges give you the margin benefit only once you have taken both the positions. So you will still need to have funds to get into the both the positions individually. Once you take the position, the margin blocked will drop automatically.

No vicky, no broker can let you hold F&O positions with lesser than exchange stipulated margins. For equity stocks, there are brokers who give you 2 to 3 times overnight leverage, but they charge you an interest between 15 to 24% on whatever margin provided.

Consider this scenario:
I short RELIANCE MAR2015 – 1200 call options @ Rs5 sometime in first week of March.
I do not square it off until the expiry.
On expiry day the underlying closes at 1000 and the last traded price of this option is Rs 1.
What would be my gains? Do I have to pay Rs 1 for options to settle? or they are expired worthless and I get entire Rs 5?

Hi Nithin,
First let me thank you for giving me this platform to gain the experience of genuine investors. Its a very big knowledge repository you have created here, which made me to learn trading. As I was only a long term investor till last month. I have noticed the point that ” it is advisable not to use MIS while buying options since all MIS positions would get squared off before the close of markets” in the above post which is very rare to hear from business point of view.

Thanks for that and I have noticed that the Windows application Zerodha Trader always have product type as NRML by default, whereas the mobile application ZerodhaMobile Trading has the default type as MIS. Which is considered to be a defect in the mobile platform, since mobile info is more prone to ignore because of the size. Could you please change the default type to NRML in the mobile platform as like in Windows application.
Since I had a successful 1st trade in windows application, but when I trade in mobile today I didnt notice this and ended up buying as MIS:(.
Attached the screenshot for reference.

1. Log into the mobile app and tap the orange settings button.
2. Once you get to the Settings page, you have an option to choose “Click here to set default trade options”
3. Setup the default product type you want, the default lot size, etc. and close the settings page.

Quick question regarding pledged shares: Can the collateral amount made available after pledging shares be used to purchase additional shares for overnight delivery (CNC)? Will this result in the ledger balance becoming negative?

Collateral amount can be used only for futures and option shorting trades (trades where margin gets blocked compared to money getting debited from your ledger). You can’t use it for buying more delivery shares or buying option premium. Yes this will result in ledger becoming negative as the money gets debited once u have bought.

A quick question may be repititive:
in case I pledge stock and sell some options with the margin received as a collateral — will my account go in negative and will there be any charge in case account goes in debit.

Hi, i am prely an intraday trader , most of the tme i keepscalping and have a margin amount of 50k to trade under MIS, but with my amount of 50k i can trade either in commodity or FNO of equity, so can u alow me to trade both using same margin amount, if not permanently then atleast for some days.

Hi Pras,
This isn’t allowed as per the rules of the Exchanges. No broker is allowed to have common margins for Equities & Commodities. If someone’s letting you do it, they aren’t complying by the guidelines of SEBI & FMC.

Hi, i am purely an intraday trader , most of the time i keep scalping and have a margin amount of 50k to trade under MIS, but with my amount of 50k i can trade either in commodity or FNO of equity, so can u allow me to trade both using same margin amount, if not permanently then atleast for some 45days, by the end of which i am sure to make another 50k and maintain a seperate account .

Hi Pras,
This isn’t allowed as per the rules of the Exchanges. No broker is allowed to have common margins for Equities & Commodities. If someone’s letting you do it, they aren’t complying by the guidelines of SEBI & FMC.

Yes Deepak you will need margin for writing options. But if you have pledged these 1000 stocks with us, you get a margin using which you can write calls of that stock or any other that you want. To pledge, send an email to [email protected] with quantity, a round trip of pledge/unpledge costs around Rs 60.

Sir, I want to know that, in “intraday trade” if I buy 100 shares @90 & sell @ 100 @ 90.50 [in this case the brokerage is Rs 20 (buy) + Rs 20 (sell) ] am I right ?? or the brokerage is still according to 0.01%….

I have one small query. Does Zerodha supports long dated Index (Nifty) option ? So can I buy a Nifty-8500-Dec,15-CE option on Zerodha ? I can do that with my current broker, wanted to know whether you support or not.

I guess that’s it. Gonna open an account ASAP 🙂
My current broker has a feature where if you buy a stock for delivery and before end of the day you square it off, then it is treated as intra-day and the corresponding brokerage is applied. So does the same work at Zerodha as well if I buy a CNC order in morning and then sell it by 3:30 PM ?

The margin money I pay is my capital locked and my returns from the spread is not even sufficient to meet the costs like riskfree interest cost of my capital, taxes and brokerage etc let alone to cover the kind of risk I take.

I can probably make some money only by selling naked options which in my opinion is mindless way to trade.

I have gone through various posts of yours and I find your reasons for not giving this margin benefit for spreads like

1. What if I close the bought portion of the spread leaving the written option open,
2. What if there is no liquidity in the market etc.

You also say that unless NSE introduces spreads as seperate products, this margin benefit will not become a reality.

It looks to me that writing options is out of the reach of a rational common man.

If this is the scenario, how can we expect to see increased liquidity in the markets. People know that they’ll lose money if they enter the markets because the risk return ratio is disproportionate heavilily skewed in favor of risk. The most important part here is, western countries offer this benefit to spread orders limiting the margin requirement only to the extent of risk exposure. I believe they follow the same SPAN. How do they manage to give this benefit.

How about you brokers join together to convince stock exchanges to introduce spread products with margins only to the extent of risk. Are these exchanges focussed on cashflows they get rather than boosting the system with quality products? What is SEBI doing? In my opinion, this encourages Naked option writing which will leave the investors broke and on the road when a black swan event happens.

Unless and until such sensible limited risk, limited return products are available in the market with reasonable margin requirements, liquidity will be a distant dream.

It’s a long post and thanks for your patience to have gone through the same. I have just let out my frustration for not being a part of a sensible game.

Understand your frustration Shiva. The issue with India is the abysmally low retail participation. NSE launched some really nice products like Interest rate futures, VIX, among others. If you look at the liquidity on these contracts, it is zilch today. I guess the exchanges are also in a catch 22 situation, they can launch new products only if there is liquidity and participation from the broader market.
But yeah, we have already represented this issue to the exchanges multiple times.

There was a news item in today’s Economic Times – SEBI is trying is increase the contract size; NSE is opposed but BSE wants it (BSE doesn’t have any derivatives business to speak of, so now wonder they want it to hurt NSE).

SEBI got rid of min-contracts a while ago according to the same news story.

All this in the name of protecting the “small guy” by keeping him away from derivatives; I’m not sure how restricting freedoms in an open marketplace helps protect “small guys” when all banks and AMCs have been extremely predatory in the last year pushing MF schemes with 3 year lock-ins and huge undisclosed commissions – specifically targeted at small guys.

As for protecting the small investor – this morning SBI futures seemed to be selling cheaper than SBI stock (based on both bid and ask quotes. I actually sold the futures before I realized this was the case) ! I don’t know the status now. The difference was about Rs. 1.5 – almost 0.5% for May 28 futures ! and as far as I know there is no dividend etc. forthcoming to justify it (e.g. ICICI bank Jun futures are selling cheaper than May futures; but there is a Rs. 5 dividend in between the expiry dates)

Needless to say, the above would be impossible if shorts on stocks were allowed in any meaningful way.

I have a question on intraday trading. I don’t want to use leverage but I would like to short sell a stock (which is not there in my demat account) in the morning and buy it back at 3:28 PM. Which order type (MIS or NRML or CNC) should I use? Thanks.

If you want to short sell a stock you have to use MIS, but all MIS positions get auto squared off at 3.28pm. The only way you will be able to do this is by shorting futures – you can short futures using NRML and hold it till close of the day.

i have observed in the blog that exchanges update margin requirements 5 times in a day and wat happens wen exchange increase f&o margin from 5 % to 10 % , if i have 1 lakh in my account and have 3 lots of nifty short ??